This is a developing story and will be updated.
Deals in the online gambling space don’t get much bigger than this one.
Flutter Entertainment announced Wednesday it would acquire the Stars Group in a deal that would create the largest online gambling entity in the US.
Flutter is the company that owns Paddy Power Betfair and FanDuel. Stars Group owns PokerStars and Sky Bet.
The Stars & Flutter deal at a glance
It’s hard to undersell the size of the deal:
- The tie-up involves Flutter buying Stars for $6 billion to combine two publicly traded companies
- The two companies combined for £3.8 billion in revenue in 2018.
- Flutter and Stars serve 100 countries around the world.
The deal should be complete sometime next year.
Breaking down the deal for the US
This tie-up has huge implications internationally. But the most interesting piece might be how it relates to the US market.
It creates what appears to be an absolute juggernaut in America; the deal instantly creates a sports betting entity that will seek to crush emerging US markets.
FanDuel Sportsbook is the early leader in sports betting in both New Jersey and Pennsylvania, the two biggest markets outside of Nevada with multiple online operators. The recently launched Fox Bet — a joint venture between Fox Sports and Stars — already had designs on becoming a major player as well.
Here’s Flutter CEO, Peter Jackson:
“The combination represents a great opportunity to deliver a step change in our presence in international markets and ensure we are ideally positioned to take advantage of the exciting opportunity in the US through a media relationship with FOX Sports as well as our development of US sports betting through Flutter’s FanDuel and TSG’s FOX Bet brands. We are committed to these two high quality brands to drive the growth of the Combined Group in the US.
What’s this mean for FanDuel and Fox Bet?
Both will continue to exist; they are both able to leverage distinct brands that have value in the US.
But FanDuel Group — Flutter’s US arm — will be combined with the Fox Bet/Stars joint venture to create a single group that will also operate on a single platform. It’s not clear which platform that will be, other than there won’t be two. But both brands will continue to exist and serve the US market.
The combined company also has access to sports betting in a combined 24 states, thanks to deals struck with Boyd Gaming and Penn National. Those are two regional casino operators that figure to hold the keys to access in many states.
Fox Sports originally had an option to buy up to 50% of Stars as part of the original Fox Bet joint venture. As part of this transaction, Fox can buy up to 18.5% of the new FanDuel Group in 2021.
It’s crazy how far FanDuel has come
A year and a half ago, FanDuel was pretty much just a daily fantasy sports site, as the acquisition by then-Paddy Power Betfair.
The acquisition started before the US sports betting ban was lifted by the US Supreme Court, so it was still bought on speculative ground in the US for its value beyond DFS.
Now, FanDuel is the biggest and best brand for sports betting, and is quite definitely the linchpin for Flutter’s and Stars’ aspirations in the US.
What’s this mean for everyone else in the US?
You were already behind, and now you are further behind.
- FanDuel already had a decided advantage in markets it serves for online sports betting and is entering (outside of Nevada, which is its own beast in the US market).
- Fox Bet has a compelling narrative of being able to leverage the Fox Sports brand and audience, but we don’t have much data on how that will shake out. But we do expect that it will be a top brand in most new markets.
- Both have shown a willingness to spend heavily on both marketing and product, a dynamic that should continue for the combined entity.
Everyone else in the space in the US will struggle to keep up with the combined assets — and will — of the new Flutter/FanDuel Group in the US.
The continued best bet is DraftKings, which holds second place in the New Jersey market. It also holds access to a database that is larger than FanDuel’s nationwide. (DK claims 11 million users via DFS and sportsbook; FanDuel claims about eight million.)
There are plenty of other potential challengers waiting in the wings, but not have shown the willingness or ability to really compete in a truly meaningful way.
- William Hill has a decent amount of access points, but does not seem to be poised to be a leader in the online sector, not to mention its brand is not as good as any of the three companies above.
- TheScore and Bet.Works have market access in 13 plus states, and theScore just raised $40 million with Fengate. Industry insiders are watching this group very closely after seeing the Bet.Works product in New Jersey and Iowa.
- MGM Resorts and Caesars have both been also-rans in the NJ market to date, despite being two giant largely US casino brands that have designs on growing the sports segment.
- Many are high on bet365‘s prospects, but it’s not exactly putting the pedal on the floor.
- Rush Street Interactive — the parent of the SugarHouse and BetRivers brands — has done well in NJ and PA. But it has a casino in Philadelphia and it’s unclear how well it will do outside of its home turf.
And that’s just a partial list of people looking to make in-roads in the US on sports.